Weekly Wrap

Investors remain convinced of a sustainable US/Iran deal which sent oil prices down another 10% this week as energy prices continue to get closer to their pre-Iran war levels. The IEA even suggested that, once the Strait of Hormuz re-opens, we may have a glut of oil (no comment on that one). Canadian stocks were flat this week as the energy sector gave back some of the prior months’ gains while gold continued to retrace its gains, giving back 1.5% and now sitting below where it started the year (perhaps the hot money left gold for SpaceX??). Speaking of moonshots, the US tech sector rallied again gaining about 3% after digesting the SpaceX IPO over the last 5 trading days, sending the overall US market up 1%. Developed International and Emerging Markets continued their energy price relief rally, gaining 1% and 2%, respectively. Economic data continued to be decent but mixed: inflation is stubborn, but oil prices are falling, consumers are spending but carry too much debt and business are spending on one thing: AI stuff! If you removed the capital expenditures on the AI buildout I have little doubt the North American economy would be going in reverse. Our dependence on this initiative makes the outlook susceptible to a rapid deterioration if it does not pan out or if we’re unable to find other beneficial initiatives to invest in for the future.

Market Insights

The Kevin Warsh era at the Fed began with a hold. This week was the new Fed Chairman’s first decision since being appointed by President Trump earlier this year. Warsh takes over from Jerome Powell, who Trump clashed with and pressured to lower rates. The rate-cutting biased guidance language from the previous statements was dropped, and we can expect less guidance from the Fed going forward. The projections from the Fed governors highlighted a notable rate hiking shift among Fed members compared to March’s projections as 50% of the Fed feel the need to raise rates at least once before the end of 2026. Furthermore, members’ projections for inflation were revised sharply upward. The other major change Warsh plans to implement is a series of task forces designed to address various topics of importance including: 1) communication methods; 2) the use of the balance sheet; 3) the data sources the Fed relies upon; 4) productivity and jobs (i.e., impact of AI), and; 5) the Fed’s inflation framework. When asked at the presser about the Fed’s inflation target, Warsh indicated there were no plans to shift that from 2%. For all the grief he gave Powell over the matter, when asked about the Fed’s decision yesterday and the prospect for potential hikes in the future, Trump seemed to shrug it off; Trump simply said “It’s all right. Whatever.” So far it appears Warsh is taking a much needed second look at some of the antiquated Fed dogma and, most importantly, he appears to be maintaining the all-important independence needed for the job (so far anyway).

Expect weaker US equity returns following strong IPO activity. After several years of subdued new issuance, the US IPO market is poised for an uptick in activity. BCA Research estimates the private companies expected to IPO amount to roughly US$4 trillion in market capitalization (or 6% of the S&P 500’s market cap), although only roughly US$200 billion of that would be initially available to the public. Based on 40 years of data, BCA found that significant IPO activity has generally been followed by weaker S&P 500 returns, with the top 20% of IPO activity being hardest hit. New listings increase the supply of investable equities and compete for capital with existing public companies, adding pressure to share prices. Further, strong IPO activity tends to occur when valuations are already rich, investor enthusiasm is high, and financial conditions are easy (you can tick each of those boxes today). While returns tended to be weaker, returns were still likely to be positive. The median return in the 12-months following a top-quintile IPO month was 8%, versus 12% following bottom quintile months. And though large IPOs have been more likely than smaller ones to occur near market peaks, most have not coincided with sustained downturns. On a sector basis, sectors receiving large new listings have typically held up initially, but performance has tended to fade over time as the market absorbs additional supply and lockups expire. In the current market, BCA sees potential for new public AI companies to draw capital away from current AI-theme winners. Strong IPO activity should caution us that we may be later in the cycle and should moderate our expectations for forward returns. The current market should have room to absorb additional issuance, but newly listed AI companies may redirect some capital away from existing winners.

Portfolio Update

Yesterday we took profits on our shares of Home Depot and reinvested the proceeds into the Brandes International Equity Fund. We believe that the macro backdrop could continue to delay a return to healthy consumer spending for some time now. US consumers were already facing high inflation at the start of 2026 and with the recent jump in energy prices combined with persistent trade related inflation pressures things don’t appear to be improving which will compromise the cyclical nature of HD’s business model. Furthermore, we believe new store growth opportunities are limited due to HD’s mature market penetration. Longer term, we continue to like HD for its dominant position in the U.S. housing market and expansion into professional distribution, while we believe HD’s more urban footprint gives it exposure to the more profitable “prosumer” market. Meanwhile, we continue to see good value in the international markets where Brandes holds a portfolio of stocks with a PE ratio below 15 and a dividend yield just under 4%. The overvalued nature of the US stock market gives us good opportunities to use this as a ‘currency’ to get better value elsewhere.

Please note any changes apply to our PIM Portfolios Only, subject to restrictions. Please call to clarify if you have any questions.

Planning On

Sharing Your Latest CRA Notice of Assessment

With tax season behind us, our focus can turn to what is more important (World Cup? Summer?). The finality of your tax situation is evidenced by receipt of your CRA Notice of Assessment. To provide you with the most comprehensive and tailored financial advice, we'd like to invite you to share your NOA with us. This document is one of the most valuable tools we can use to understand much of your tax picture and identify opportunities for optimization.

What Your NOA Reveals

Your Notice of Assessment contains important information that can directly impact our recommendations for you:

• Taxable Income & Tax Paid: We can see your total income (and net income) reported and taxes assessed, helping us identify potential opportunities.
• RRSP Contribution Room: Your available RRSP space is listed here – essential for retirement planning strategies.
• Carry-forward Amounts: Unused losses, credits, and other deductions that could reduce future tax liability.
• Notice of Reassessment History: This alerts us to any CRA adjustments and flags areas requiring attention.

How We Use This Information

Armed with your NOA, we can:

• Identify possibly overlooked deductions or credits specific to your situation
• Optimize your investment strategy in registered and non-registered accounts
• Develop a proactive tax plan rather than a reactive year-end scramble
• Ensure your withholdings and instalments are appropriately calibrated and we can even help you make those payments from your non-registered investment accounts.

Next Steps 

Simply forward a PDF or image of your most recent NOA to our team. If you need help locating it, CRA's My Account portal provides instant access or ask your accountant to send it directly to us.

Tax planning is an important discipline in wealth management and while we are not licensed accountants, armed with this information from your NOA we may be able to help maximize your financial situation.  

This information is not intended to provide legal, tax, or insurance advice. To ensure that your own circumstances have been properly considered and that action is taken based on the latest information available, you should obtain professional advice from a qualified lawyer or accountant, as applicable, before acting on any of the information.

Charts of the Week

Spare Time Updates

What to Say When Someone’s Team Loses

When a friend is gutted over a team’s loss, your instinct might be to fix the feeling fast. But the best approach isn’t to talk them out of their disappointment and instead to widen the frame around it.

The Common Microwave Mistake You Probably Make Every Day

There should be a word for the feeling you get when you realize there are leftovers in the fridge and you’re off the hook for making dinner. A simple fix can help prevent rubbery leftovers and unevenly heated meals.

Feel free to share this newsletter with anyone who might benefit from it or find value in it. Thank you for reading our commentary. We welcome your feedback!

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